Rapid wage in­creases threaten growth

Southeast Asia Globe - - Agenda -

The in­crease in Viet­nam’s min­i­mum wage is out­pac­ing its pro­duc­tiv­ity growth, ac­cord­ing to a new re­port from the Viet­nam In­sti­tute for Eco­nomic and Pol­icy Re­search (VEPR). The re­port found that the min­i­mum wage-to­labour pro­duc­tiv­ity ra­tio had in­creased from 25% in 2007 to 50% in 2015, un­der­min­ing the coun­try’s eco­nomic growth prospects.

The in­crease in the gap be­tween labour costs and pro­duc­tiv­ity has been far larger in Viet­nam than in In­done­sia and Thailand. VEPR’s pres­i­dent, Nguyen Duc Thanh, said the grow­ing dis­par­ity would re­duce in­vest­ment and cut into com­pany prof­its.

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